It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)

Saturday, September 02, 2006

The Cost of War

As George Bernard Shaw once said, if you put all the economists in the world end to end they would still not reach a conclusion.

The U.S. is spending $6 billion a month on Iraq under current appropriations. To date, expenditures have totaled an estimated $320 billion, a supplemental bill now working its way through Congress, according to a report by Steven Kosiak, a budget analyst with the Center for Strategic and Budgetary Assessments.

A study by the Congressional Budget Office forecast an additional $225 billion in spending over the next 10 years, assuming troop levels fall to 50,000 in a few years.

"Taken together, it is quite possible that the United States will ultimately spend more on U.S. military operations in Iraq and Afghanistan than it did on the Korean War ($455 billion) or the Vietnam War ($650 billion)," Kosiak wrote.

But a study by Joseph Stiglitz, a Nobel Prize-winning economist, war critic, and former Clinton administration official, estimated the total cost of the war in the range of $750 billion to $1.2 trillion. A big part of that, he says, is the continuing cost of health-care for the more than 17,000 soldiers wounded in the Iraq conflict.

Economists say it's very difficult to document the war's economic fallout. Bob Parker, a former chief statistician for the Bureau of Economic Analysis, said the most complicating factor is that the military is spending much of the money overseas, which doesn't directly benefit the economy on the home front.

Smith said the war impact is "highly concentrated in a few industries and few locations," especially near the military's major staging areas like Fayetteville, N.C., Jacksonville Fla., and Norfolk Va.Companies like Halliburton Co. and Bechtel Group Inc. have benefited, Smith said.

Some economists, who oppose the war, believe it is hurting the economy in insidious ways.

"The problem of the war was it was so easy to finance, if that is a problem," said Robert Brusca, chief economist at FAO Economics.

On a political level, the war has pushed back Social Security reform and longer-term fixes to so-called structural aspects of the federal budget deficit.

At the end of the day, economists are growing increasingly worried as the war begins its fourth year on the ground.

"We've got this sort of house of cards," said Swonk. "It is either a strong house of cards or the whole thing could implode on us. It could go either way."